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Carlyle Group LP and Prudential Financial Inc. are among investment and insurance
companies warning that potential changes to financial rules may present risks to their
businesses.

Republicans say paring the Dodd-Frank Act will be good for business. However, uncertainty
about when any overhaul may happen and what the end result may look like pose challenges,
companies said in annual disclosures filed with the Securities and Exchange Commission.

“We cannot predict the timing or requirements of the regulations not yet adopted under
Dodd-Frank or how such regulations will impact our business, credit or financial strength
ratings, results of operations, cash flows, financial condition or competitive position,”
Prudential Financial said in a Feb. 17
disclosure. “Furthermore, we cannot predict whether such regulations will make it advisable
or require us to hold or raise additional capital or liquid assets, potentially affecting
capital deployment activities, including buying back shares or paying dividends.”

Carlyle Group

In a Feb. 16
filing, Carlyle Group, a Washington-based global alternative asset manager, warned that
Republican lawmakers’ legislation to undo parts of Dodd-Frank—expected in the coming
weeks—could significantly increase the SEC’s enforcement capabilities and penalties
under the Investment Company Act and Investment Advisers Act.

“Any changes in the regulatory framework applicable to our business, including the
changes described above, may impose additional costs on us, require the attention
of our senior management or result in limitations on the manner in which we conduct
our business,” the company said. “Compliance with any new laws or regulations could
make compliance more difficult and expensive, affect the manner in which we conduct
our business and adversely affect our profitability.”

The companies are signaling that there is an unknown out there, Stephen M. Quinlivan,
a Minneapolis-based partner at Stinson Leonard Street LLP, told Bloomberg BNA.

“The rollback of Dodd-Frank isn’t necessarily a net plus to anyone,” said Quinlivan,
whose practice focuses on mergers and acquisitions and securities transactions. What’s
coming next is what matters, he said. For example, companies are worried that if the
Consumer Financial Protection Bureau is completely eliminated, the states may start
imposing tough rules, he said.

Uncertainty

A rollback may be problematic for companies that have spent time and money to put
in place procedures mandated by Dodd-Frank, Michael Hermsen, a Chicago-based partner
at Mayer Brown LLP’s Corporate and Securities group, told Bloomberg BNA. These companies
will have to think about what changes they may need to make if parts of the statute
are repealed or amended, he said.

President Donald Trump earlier this month signed an executive order outlining his
administration’s core principles for financial regulations and calling on the Treasury
Secretary to review Dodd-Frank mandates. Meanwhile, House Republicans have said they
plan to introduce legislation that will cast aside core components of the 2010 law.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has said his
new draft of the Financial Choice Act will largely track an earlier version of the
bill he introduced last year.

The business development company also cited Trump’s statements that he will push to
withdraw the U.S. from various trade agreements. “We cannot predict which, if any,
of these actions will be taken or, if taken, their effect on the financial stability
of the United States,” Triangle said in a Feb. 22 filing. “Such actions could have
a significant adverse effect on our business, financial condition and results of operations.”

Arlington Asset Investment Corp., a publicly traded principal investment firm that
acquires and holds mortgage-related and other assets, cited the Trump administration
as a risk factor in its Feb. 21
disclosure. “Uncertainty over the Trump administration’s policies, together with questions regarding
the administration’s ability to work with Congress in order to implement such policies,
are likely to increase market and credit volatility over 2017,” it said.

Other companies were more vague in their filings. “There may be changes in the laws,
regulations, credit card association rules or other industry standards that affect
our operating environment in substantial and unpredictable ways in the U.S. as well
as internationally,” credit card processor Total System Services Inc.
said in its Feb. 24 disclosure.

To contact the reporter on this story: Michael Greene in Washington at
mGreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at
ywilczek@bna.com

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